National Commerce Corporation Announces First Quarter 2017 Earnings

Published 6:00 PM ET Mon, 24 April 2017
Globe Newswire

SHARES

BIRMINGHAM, Ala., April 24, 2017 (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq:NCOM) (“NCC” or the “Company”), the parent company of National Bank of Commerce (“NBC”), today reported first quarter 2017 net income to common shareholders of $5.9 million, compared to $3.8 million for the first quarter of 2016. Diluted net earnings per share were $0.45 in the first quarter of 2017, compared to $0.44 in the fourth quarter of 2016 and $0.34 in the first quarter of 2016.

“We are pleased with our first quarter performance, which provides us with a good start to 2017,” said John H. Holcomb, III, Chairman and Chief Executive Officer of the Company. “We look forward to the remainder of the year.”

During the first quarter of 2017, the Company successfully completed its acquisition of Private Bancshares, Inc. through a merger of the companies, followed by the merger of their respective bank subsidiaries, Private Bank of Buckhead and NBC. In March 2017, the Company completed the system integration of Private Bank of Buckhead to NBC’s core operating system. “We are glad to have had a successful system conversion with Private Bank, and I want to personally thank all of our colleagues who worked so hard to make that conversion a success. We will continue our focus on asset quality, customer service and growing our profitability, and we look forward to the remainder of 2017,” said Richard Murray, IV, President and Chief Operating Officer of the Company.

Several important measures from the first quarter of 2017 are as follows:

Net Interest Margin (taxable equivalent) of 4.18% for the first quarter of 2017, compared to 3.99% for the fourth quarter of 2016 and 4.21% for the first quarter of 2016. The first quarter 2017 margin increased 0.19% compared to the 2016 fourth quarter due primarily to a change in funding mix, with higher levels of noninterest-bearing deposits in the 2017 first quarter compared to the 2016 fourth quarter.

Return on Average Assets of 1.00% for the first quarter of 2017, compared to 0.86% for the first quarter of 2016.

Return on Average Tangible Common Equity of 11.45% for the first quarter of 2017, compared to 9.21% for the first quarter of 2016.

$131 million in 2017 first quarter mortgage production, compared to $64 million for the first quarter of 2016. The first quarter 2017 production includes mortgages closed by the mortgage division that the Company acquired in the Private Bancshares, Inc. transaction.

$254 million in 2017 first quarter purchased volume in the factoring division, compared to $179 million for the first quarter of 2016.

A decrease in non-acquired non-performing assets to $2.5 million, from $2.7 million at December 31, 2016.

Annualized net recoveries of 0.07% of average loans for the first quarter of 2017, compared to net charge-offs of 0.13% for the first quarter of 2016.

Provision for loan losses of $156 thousand during the first quarter of 2017, compared to $441 thousand in the 2016 fourth quarter and $1.5 million in the first quarter of 2016. The decrease during the 2017 first quarter was attributable in part to net recoveries during the 2017 first quarter, general improvement in problem assets, and general economic factors.

Ending tangible book value per share of $16.48.

Ending book value per share of $24.51.

The Company will host a live audio webcast conference call beginning at 8:30 a.m. Central Time on April 25, 2017 to discuss earnings and operating results for the 2017 first quarter. Investors may call in (toll free) by dialing (844) 296-8205 (conference ID 3350814). A replay of the conference call will be available until April 27, 2017 and can be accessed by dialing (855) 859-2056.

Investors who plan to participate in the live webcast of the conference call should access the webcast by visiting www.nationalbankofcommerce.com and clicking on the “Investor Relations” link under the “Learn More” tab located on that webpage. A replay of the webcast will be available on the website for one year. A copy of the news release will also be available at the same location.

Use of Non-GAAP Financial Measures

Some of the financial measures presented in this press release and included in the accompanying unaudited financial statements are not measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include tangible common equity, return on average tangible common equity, tangible book value per share, allowance for loan losses to nonacquired loans, efficiency ratio and operating efficiency ratio. The Company’s management uses the non-GAAP financial measures set forth below in its analysis of the Company’s performance.

“Tangible common equity” is total shareholders’ equity less goodwill, other intangible assets and minority interest not included in intangible assets.

“Average tangible common equity” is defined as the average of tangible common equity for the applicable period.

“Return on average tangible common equity,” or ROATCE, is defined as net income available to common shareholders divided by average tangible common equity.

“Tangible book value per share” is defined as tangible common equity divided by total common shares outstanding. This measure is important to investors interested in changes from period to period in book value per share exclusive of changes in intangible assets.

The Company’s management believes these above measures, each of which utilizes the concept of tangible common equity rather than total common equity, provide useful information to management and investors because they eliminate the impact of goodwill and other intangible assets created in an acquisition. These measures are commonly used by investors when assessing financial institutions.

“Allowance for loan losses to nonacquired loans” is defined as the total allowance for loan losses, less the allowance for loan losses attributable to factored receivables, divided by nonacquired loans held for investment, excluding factored receivables at the end of the period. This measure is important to investors because it disaggregates the acquired and non-acquired loans and provides a measure that may be more comparable to a bank that has no acquired loans. This measure also excludes the allowance and factored receivable balances at the Company’s subsidiary, Corporate Billing, LLC, which is helpful to investors because of the unique nature of that business and the rapid turnover of those receivables, and provides a measure that is more comparable to a bank that does not have a receivables factoring business.

“Efficiency ratio” is defined as noninterest expense divided by operating revenue (which is equal to net interest income plus noninterest income), excluding one-time gains and losses on sales of securities. This measure is important to investors looking for a measure of efficiency in productivity based on the amount of revenue generated for each dollar spent.

“Operating efficiency ratio” is defined as noninterest expense divided by operating revenue, excluding one-time gains and losses on sales of securities and one-time gains and expenses related to merger and acquisition activities. This measure is important to investors looking for a measure of efficiency in productivity based on the amount of revenue generated for each dollar spent.

The Company’s management believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to NCC’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, NCC acknowledges that the non-GAAP financial measures have a number of limitations. As such, NCC cautions readers that these disclosures should not be viewed as a substitute for results determined in accordance with GAAP, and that these disclosures are not necessarily comparable to non-GAAP financial measures that other companies use. These non-GAAP financial measures exclude various items detailed in the attached “Non-GAAP Reconciliation.”

About National Commerce Corporation

National Commerce Corporation (Nasdaq:NCOM), a Delaware corporation, is a financial holding company headquartered in Birmingham, Alabama. Substantially all of the operations of National Commerce Corporation are conducted through the company’s wholly owned subsidiary, National Bank of Commerce. National Bank of Commerce currently operates seven full-service banking offices in Alabama, ten full-service banking offices in central and northeast Florida (including under the trade names United Legacy Bank and Reunion Bank of Florida) and two full-service banking offices in Atlanta, Georgia (including under the trade names Private Bank of Buckhead, Private Bank of Decatur and PrivatePlus Mortgage). National Bank of Commerce provides a broad array of financial services for commercial and consumer customers.

Additionally, National Bank of Commerce owns a majority stake in Corporate Billing, LLC, a transaction-based finance company headquartered in Decatur, Alabama that provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers throughout the United States and parts of Canada.

National Commerce Corporation files periodic reports with the U.S. Securities and Exchange Commission (the “SEC”). Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at www.nationalbankofcommerce.com. More information about National Commerce Corporation and National Bank of Commerce may be obtained at www.nationalbankofcommerce.com.

Forward-Looking StatementsCertain statements contained in this press release that are not statements of historical fact constitute forward-looking statements for which NCC claims the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in NCC’s future filings with the SEC, in press releases and in oral and written statements made by NCC or with NCC’s approval that are not statements of historical fact and that constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of NCC’s plans, objectives and expectations or those of its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to various risks and uncertainties, including those risks and uncertainties described under the heading “Risk Factors” in NCC’s Annual Report on Form 10-K for the year ended December 31, 2016 and described in any subsequent reports that NCC has filed with the SEC. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, and these statements should not be relied upon as predictions of future events. NCC undertakes no obligation to update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. In that respect, NCC cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

NATIONAL COMMERCE CORPORATION

Unaudited Financial Highlights

(In thousands, except share and per share amounts and percentages or as otherwise noted)

For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2017

2016

2016

2016

2016

Earnings Summary

Interest income

$

24,899

$

19,032

$

18,836

$

18,382

$

18,313

Interest expense

2,469

2,042

1,959

1,730

1,650

Net interest income

22,430

16,990

16,877

16,652

16,663

Provision for loan losses

156

441

373

901

1,533

Other noninterest income (1)

5,440

3,472

4,002

3,357

3,125

Merger/conversion-related expenses

387

169

160

12

138

Other noninterest expense (2)

18,074

11,971

12,472

12,242

11,915

Income before income taxes

9,253

7,881

7,874

6,854

6,202

Income tax expense

2,841

2,600

2,639

2,072

2,083

Net income before minority interest

6,412

5,281

5,235

4,782

4,119

Net income attributable to minority interest

493

374

422

428

340

Net income to common shareholders

$

5,919

$

4,907

$

4,813

$

4,354

$

3,779

Weighted average common and diluted shares outstanding

Basic

12,901,040

10,930,309

10,890,860

10,866,788

10,855,871

Diluted

13,283,075

11,173,733

11,115,134

11,067,972

11,039,208

Net earnings per common share

Basic

$

0.46

$

0.45

$

0.44

$

0.40

$

0.35

Diluted

$

0.45

$

0.44

$

0.43

$

0.39

$

0.34

March 31,

December 31,

September 30,

June 30,

March 31,

Selected Performance Ratios

2017

2016

2016

2016

2016

Return on average assets (ROAA) (3)

1.00

%

1.05

%

1.08

%

1.00

%

0.86

%

Return on average equity (ROAE)

7.67

8.33

8.36

7.84

6.95

Return on average tangible common equity

(ROATCE)

11.45

10.78

10.90

10.31

9.21

Net interest margin - taxable equivalent

4.18

3.99

4.18

4.23

4.21

Efficiency ratio

66.24

59.33

60.50

61.24

60.91

Operating efficiency ratio (2)

64.85

58.50

59.73

61.18

60.21

Noninterest income / average assets (annualized)

0.92

0.74

0.90

0.77

0.71

Noninterest expense / average assets (annualized)

3.11

2.60

2.85

2.83

2.76

Yield on loans

5.29

4.95

5.08

5.06

5.17

Cost of total deposits

0.40

%

0.40

%

0.40

%

0.40

%

0.42

%

March 31,

December 31,

September 30,

June 30,

March 31,

Factoring Metrics

2017

2016

2016

2016

2016

Recourse purchased volume

$

127,882

$

82,923

$

71,872

$

68,567

$

66,554

Non-recourse purchased volume

125,751

104,797

100,486

98,550

112,196

Total purchased volume

$

253,633

$

187,720

$

172,358

$

167,117

$

178,750

Average turn (days)

35.61

38.35

38.13

39.92

38.16

Net charge-offs / total purchased volume

0.03

%

0.12

%

0.05

%

0.07

%

0.27

%

Average discount rate

1.44

%

1.67

%

1.70

%

1.69

%

1.72

%

March 31,

December 31,

September 30,

June 30,

March 31,

Mortgage Metrics

2017

2016

2016

2016

2016

Total production ($)

$

130,875

$

76,028

$

91,613

$

91,466

$

63,802

Refinance (%)

27.4

%

40.2

%

30.4

%

17.2

%

18.2

%

Purchases (%)

72.6

%

59.8

%

69.6

%

82.8

%

81.8

%

As of

March 31,

December 31,

September 30,

June 30,

March 31,

Balance Sheet Highlights

2017

2016

2016

2016

2016

Cash and cash equivalents

$

318,730

$

217,293

$

122,920

$

86,163

$

123,853

Total investment securities

98,390

99,709

102,848

89,495

82,954

Mortgage loans held-for-sale

19,517

15,373

7,810

19,468

12,529

Acquired purchased credit-impaired loans

20,012

9,507

9,500

10,382

10,205

Acquired non-purchased credit-impaired loans

541,509

315,867

323,125

346,685

356,305

Nonacquired loans held for investment (4)

1,153,897

1,076,209

1,009,677

978,836

942,781

CBI loans (factoring receivables)

99,317

83,901

70,066

70,673

74,248

Total gross loans held for investment

1,814,735

1,485,484

1,412,368

1,406,576

1,383,539

Allowance for loan losses

12,565

12,113

11,950

11,642

10,927

Total intangibles

103,519

52,803

52,962

53,154

53,312

Total assets

2,445,149

1,950,784

1,779,278

1,735,782

1,735,940

Total deposits

2,080,307

1,667,710

1,499,879

1,460,877

1,498,197

FHLB and other borrowings

7,000

7,000

7,000

7,000

7,000

Subordinated debt

24,513

24,500

24,487

24,540

-

Total liabilities

2,127,727

1,713,740

1,547,105

1,509,662

1,514,840

Minority interest

7,427

7,309

7,357

7,362

7,275

Common stock

129

109

109

109

109

Total shareholders' equity

317,422

237,044

232,173

226,120

221,100

Tangible common equity

$

213,410

$

183,866

$

178,788

$

172,538

$

167,447

End of period common shares outstanding

12,948,778

10,934,541

10,920,423

10,870,033

10,861,487

As of and For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Asset Quality Analysis

2017

2016

2016

2016

2016

Nonacquired

Nonaccrual loans

$

68

$

69

$

19

$

248

$

184

Other real estate and repossessed assets

1,849

2,068

2,068

2,068

2,792

Loans past due 90 days or more and still accruing

538

581

358

406

452

Total nonacquired nonperforming assets

$

2,455

$

2,718

$

2,445

$

2,722

$

3,428

Acquired

Nonaccrual loans

$

2,949

$

2,768

$

2,982

$

3,099

$

3,617

Other real estate and repossessed assets

-

-

92

92

92

Loans past due 90 days or more and still accruing

-

-

-

-

-

Total acquired nonperforming assets

$

2,949

$

2,768

$

3,074

$

3,191

$

3,709

Selected asset quality ratios

Nonperforming assets / Assets

0.22

%

0.28

%

0.31

%

0.34

%

0.41

%

Nonperforming assets / (Loans + OREO + repossessed assets)

Net charge-offs (recoveries) to average loans (annualized)

(0.07

)

0.08

0.02

0.05

0.13

Allowance for loan losses to total loans

0.69

0.82

0.85

0.83

0.79

Nonacquired nonperforming assets / (Nonacquired loans +

nonacquired OREO + nonacquired repossessed assets) (4)

0.21

0.25

0.24

0.28

0.36

Allowance for loan losses to nonacquired nonperforming

loans

2,073.43

1,863.54

3,169.76

1,780.12

1,718.08

Allowance for loan losses to nonacquired loans (4)

1.05

%

1.08

%

1.13

%

1.14

%

1.11

%

For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Taxable Equivalent Yields/Rates

2017

2016

2016

2016

2016

Interest income:

Loans

5.29

%

4.95

%

5.08

%

5.06

%

5.17

%

Mortgage loans held-for-sale

4.13

2.99

4.12

3.51

4.40

Interest on securities:

Taxable

2.63

2.52

2.55

1.95

2.68

Non-taxable

4.98

4.90

4.85

4.93

4.90

Cash balances in other banks

0.84

0.63

0.60

0.65

0.58

Total interest-earning assets

4.64

4.47

4.66

4.67

4.63

Interest expense:

Interest on deposits

0.56

0.55

0.54

0.54

0.56

Interest on FHLB and other borrowings

3.19

4.04

4.04

4.08

2.97

Interest on subordinated debt

6.42

6.30

6.32

6.34

-

Total interest-bearing liabilities

0.68

0.69

0.68

0.62

0.58

Net interest spread

3.96

3.78

3.98

4.05

4.05

Net interest margin

4.18

%

3.99

%

4.18

%

4.23

%

4.21

%

As of

March 31,

December 31,

September 30,

June 30,

March 31,

2017

2016

2016

2016

2016

Shareholders' Equity and Capital Ratios

Tier 1 Leverage Ratio

8.86

%

9.57

%

9.74

%

9.51

%

9.13

%

Tier 1 Common Capital Ratio

11.06

11.46

11.64

11.25

11.18

Tier 1 Risk-based Capital Ratio

11.06

11.46

11.64

11.25

11.18

Total Risk-based Capital Ratio

13.07

13.90

14.19

13.79

11.97

Equity / Assets

12.98

12.15

13.05

13.03

12.74

Tangible common equity to tangible assets

9.11

%

9.69

%

10.36

%

10.25

%

9.95

%

Book value per share

$

24.51

$

21.68

$

21.26

$

20.80

$

20.36

Tangible book value per share

$

16.48

$

16.82

$

16.37

$

15.87

$

15.42

For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2017

2016

2016

2016

2016

Detail of other noninterest expense

Salaries and employee benefits

$

10,073

$

6,935

$

6,948

$

6,907

$

6,945

Commission-based compensation

1,723

1,076

1,104

1,036

875

Occupancy and equipment expense

1,473

1,193

1,181

1,131

1,135

Data processing expenses

948

568

572

618

667

Advertising and marketing expenses

468

156

198

191

160

Legal fees

233

163

182

179

122

FDIC insurance assessments

258

234

246

257

263

Property and casualty insurance premiums

143

95

90

166

223

Accounting and audit expenses

318

211

252

249

250

Consulting and other professional expenses

497

201

330

184

243

Telecommunications expenses

186

114

146

140

159

ORE, Repo asset and other collection expenses

272

41

142

89

59

Core deposit intangible amortization

348

182

191

192

191

Other noninterest expense

1,521

971

1,050

915

761

Total noninterest expense

$

18,461

$

12,140

$

12,632

$

12,254

$

12,053

As of

March 31,

December 31,

September 30,

June 30,

March 31,

Non-GAAP Reconciliation

2017

2016

2016

2016

2016

Total shareholders' equity

$

317,422

$

237,044

$

232,173

$

226,120

$

221,100

Less: intangible assets

103,519

52,803

52,962

53,154

53,312

Less: minority interest not included in intangible assets

493

375

423

428

341

Tangible common equity

$

213,410

$

183,866

$

178,788

$

172,538

$

167,447

Common shares outstanding at year or period end

12,948,778

10,934,541

10,920,423

10,870,033

10,861,487

Tangible book value per share

$

16.48

$

16.82

$

16.37

$

15.87

$

15.42

Total assets at end of period

$

2,445,149

$

1,950,784

$

1,779,278

$

1,735,782

$

1,735,940

Less: intangible assets

103,519

52,803

52,962

53,154

53,312

Adjusted total assets at end of period

$

2,341,630

$

1,897,981

$

1,726,316

$

1,682,628

$

1,682,628

Tangible common equity to tangible assets

9.11

%

9.69

%

10.36

%

10.25

%

9.95

%

Total allowance for loan losses

$

12,565

$

12,113

$

11,950

$

11,642

$

10,927

Less: allowance for loan losses attributable to

CBI (factoring receivables)

500

500

500

500

500

Adjusted allowance for loan losses at end of period

$

12,065

$

11,613

$

11,450

$

11,142

$

10,427

Nonacquired loans held for investment (4)

1,153,897

1,076,209

1,009,677

978,836

942,781

Allowance for loan losses to nonacquired loans (4)

1.05

%

1.08

%

1.13

%

1.14

%

1.11

%

For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2017

2016

2016

2016

2016

Non-GAAP Reconciliation

Total average shareholders' equity

$

312,971

$

234,249

$

228,953

$

223,357

$

218,730

Less: average intangible assets

103,004

52,872

53,056

53,234

53,388

Less: average minority interest not included

in intangible assets

295

262

282

284

231

Average tangible common equity

$

209,672

$

181,115

$

175,615

$

169,839

$

165,111

Net income to common shareholders

5,919

4,907

4,813

4,354

3,779

Return on average tangible common equity (ROATCE)

11.45

%

10.78

%

10.90

%

10.31

%

9.21

%

Efficiency ratio:

Net interest income

$

22,430

$

16,990

$

16,877

$

16,652

$

16,663

Total noninterest income

5,440

3,472

4,002

3,357

3,125

Less: gain (loss) on sale of securities

-

-

-

-

-

Operating revenue

$

27,870

$

20,462

$

20,879

$

20,009

$

19,788

Expenses:

Total noninterest expenses

$

18,461

$

12,140

$

12,632

$

12,254

$

12,053

Efficiency ratio

66.24

%

59.33

%

60.50

%

61.24

%

60.91

%

Operating efficiency ratio:

Net interest income

$

22,430

$

16,990

$

16,877

$

16,652

$

16,663

Total noninterest income

5,440

3,472

4,002

3,357

3,125

Less: gain (loss) on sale of securities

-

-

-

-

-

Operating revenue

$

27,870

$

20,462

$

20,879

$

20,009

$

19,788

Expenses:

Total noninterest expenses

$

18,461

$

12,140

$

12,632

$

12,254

$

12,053

Less: merger/conversion-related expenses

387

169

160

12

138

Adjusted noninterest expenses

$

18,074

$

11,971

$

12,472

$

12,242

$

11,915

Operating efficiency ratio

64.85

%

58.50

%

59.73

%

61.18

%

60.21

%

(1) Excludes securities gains

(2) Excludes merger/conversion-related expenses

(3) Net income to common shareholders / average assets

(4) Excludes CBI loans (factoring receivables)

NATIONAL COMMERCE CORPORATION

Unaudited Consolidated Balance Sheets

(In thousands, except share and per share data)

Assets

March 31, 2017

December 31, 2016

Cash and due from banks

$

40,237

$

35,897

Interest-bearing deposits with banks

278,493

181,396

Cash and cash equivalents

318,730

217,293

Investment securities held-to-maturity (fair value of $25,823 and $25,894 at March 31, 2017